updated 12/31/2012 10:49:39 AM ET 2012-12-31T15:49:39

THE RACHEL MADDOW SHOW
December 28, 2012

Guests: Tom Coburn, Jeff Merkley, Julian Sanchez

EZRA KLEIN, GUEST HOST: Good to see you, too, and happy Friday.

And thanks to you at home for sticking around for the next hour.
Rachel`s got the night off.

But we learned something huge today. We are going over the fiscal
cliff. We are going either all the way over or going partly over, but we
are definitely, definitely going over.

That whole fiscal cliff thing, where Congress and the White House
can`t reach a deal on taxes and spending before the end of the year and
they maybe get us into a recession, it`s definitely happening. That was
the whole point of President Obama`s press conference this afternoon.

(BEGIN VIDEO CLIP)

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: I still want to get
this done. It`s the right thing to do for our families, for our
businesses, and for our entire economy. But the hour for immediate action
is here. It is now.

(END VIDEO CLIP)

KLEIN: Allow me a quick update here. That press conference, it came
after President Obama met with John Boehner and Nancy Pelosi and Harry Reid
and Mitch McConnell, so all the key congressional leaders.

And listen to the president here.

(BEGIN VIDEO CLIP)

OBAMA: The American people are watching what we do here. Obviously,
their patience is already thin. This is deja vu all over again.

America wonders why it is that in this town for some reason, you can`t
get stuff done in an organized timetable. Why everything always has to
wait until the last minute. Well, we`re now at the last minute. And the
American people are not going to have any patience for a politically self-
inflicted wound to our economy. Not right now.

I just have to repeat. You know, outside of Washington, nobody
understands how it is that this seems to be a repeat pattern, over and over
again.

Ordinary folks, they do their jobs. They meet deadlines. They sit
down and they discuss things and then things happen. If there are
disagreements, they sort through the disagreements.

The notion that our elected leadership can`t do the same thing is
mindboggling to them, and needs to stop.

(END VIDEO CLIP)

KLEIN: I just have to repeat, Congress, you are terrible at your
jobs. I really don`t like working with you.

We`re going to talk a bit later in the show about everybody hates
Congress and what we can do about that. But as much as the public hates
Congress, you really get the feeling that Congress` approval rating among
President Obama is in the neighborhood of negative 75,000 percent. And
yes, numbers geeks, not a real number.

But you get the idea -- he seems really tired of working with these
people. But there is a way in which Congress, and particularly
congressional Republicans might actually be helping President Obama out
right now.

Everybody`s always known two things about the cliff. You`re almost
certainly going to get more taxes in a deal after you go over than in a
deal before you go over it. That`s because after you go over the cliff,
taxes already go up across-the-board for everyone. They go up by $5
trillion. And so anything you do, any reasonable deal Congress reaches, it
will be a big tax cut.

But the other thing about the fiscal cliff is you don`t want to be
blamed for going over it. It is going to be bad for the economy. It`s bad
for the country. What Speaker Boehner`s done is create a situation in
which we`re going to go over the fiscal cliff.

But the people who want higher taxes, the Democrats, they`re not going
to be blamed for it. After all, it was John Boehner who walked away from
negotiations to try Plan B last week. Then it was John Boehner who planned
to pass Plan B that very same week. Then, it was Mr. Boehner who said it
was up to the Senate, someone else`s problem.

Just from a P.R. perspective, what John Boehner has done here is a
debacle for the Republicans.

And the White House, they`ve just been sitting back the last week or
so and letting it happen. But today, they gave us their plan going
forward. You could call it deal and jam.

(BEGIN VIDEO CLIP)

OBAMA: And I`m optimistic we may still be able to reach an agreement
that could pass both houses in time. Senators Reid and McConnell are
working on such an agreement as we speak. But if an agreement isn`t
reached in time, between Senator Reid and Senator McConnell, then I will
urge Senator Reid to bring to the floor a basic package for an up-or-down
vote, one that protects the middle class from an income tax hike, extends
the vital lifeline of unemployment insurance to 2 million American looking
for a job, and lays the groundwork for future cooperation on more economic
growth and deficit reduction.

You guys, I can hear you over there.

I believe such a proposal could pass both houses with bipartisan
majorities, as long as those leaders allow it, to actually come to a vote.
If members of the House or the Senate want to vote no, they can, but we
should let everybody vote.

(END VIDEO CLIP)

KLEIN: I would actually really like to know who he was shushing
there. But to his main point, here`s what the president intends to do.
Senators Reid and McConnell will try to come to a deal. If they fail, the
White House and Harry Reid are going to try to jam through a bill that
increases taxes on rich people and extends unemployment insurance, which
are the two key Democratic priorities.

They`ll pretty much dare Republicans to block it. And Republicans
probably won`t be able to, at least not for long.

Here`s Johnny Isakson, a Republican senator from Georgia, over the
weekend.

(BEGIN VIDEO CLIP)

SEN. JOHNNY ISAKSON (R), GEORGIA: If we get down to the end of this
year, and the only choice we have is to save taxes going up on the middle
class, then I would support that.

(END VIDEO CLIP)

KLEIN: Last weekend, "The Wall Street Journal" had a great piece
going behind the scenes on the fiscal cliff negotiations. And in it, they
quoted this exchange between Speaker Boehner and President Obama.

Mr. Boehner said he wanted to deal along the lines what the two men
had negotiated, summer of 2011, in the fight over raising the debt ceiling.
"You missed your opportunity on that," the president told him. Cold.

But what we know right now, what we know from that is that John
Boehner wishes he could go back in time, get in the time machine, go back
to 2011, and get the deal that President Obama offered him then. Mr.
Boehner wants another bite at that 2011 deal, because back then, the
president was offering to stop at $800 billion in new taxes on the wealthy.

My prediction here right now is that in a few weeks or a few months,
Republicans are going to wish they could go back to 2012, right now, and
get the deal President Obama offered them a week ago, which only raised
about $1.2 trillion in taxes, because here`s what I think is going to
happen now.

If we get a small deal before we go over the fiscal cliff, either
because Harry Reid and Mitch McConnell come to a deal in the Senate, or
because Democrats jam the Republicans in congress, it`s mostly going to be
about extending the Bush tax cuts for the middle class, which will mean
letting them expire for the rich. That will net somewhere around $600
billion in new tax revenue. The White House will pocket that. They will
have got in three quarters of what they wanted last year, before even the
negotiations had really kicked off.

Then, we`re going to go over the cliff and the pressure will mount
quickly to strike another deal. Republicans are still going to want
entitlement cuts. And so, the White House will insist that the next deal
include a dollar in tax increases for every dollar in spending cuts.

And so, in that next deal, image Republicans want $800 billion in
spending cuts, a number of they`ve kicked around before. Democrats will
say they need that much in taxes, too. And because they`ve already raised
rates, they got those middle class tax cuts extended, and the rich ones
expired, they`ll be open to do hitting through tax reform, which will be
easier for Republicans to swallow.

So, let`s say they do get the one to one match. That will be an $800
billion tax increase for a $1.4 trillion revenue increase in total. So,
Democrats could easily end up when all of this is said and done with more
revenue than President Obama was asking for a week ago.

And it will happen if it happens, because over and over and over and
over again, John Boehner and the House Republicans could not take yes for
an answer. They had to say no to this president. And so, they kept
delaying until they were weaker. They pushed negotiations from 2011 where
they were very strong, until 2012, right after the president had won re-
election, and now they`re pushing to 2013, after the fiscal cliff hits and
taxes go up and they get blamed.

It is an odd way to negotiate. To get one Republican view on what
will come next year, early this evening, shortly after the president`s
press conference, I had the privilege to speaking to Republican Senator Tom
Coburn of Oklahoma.

(BEGIN VIDEOTAPE)

KLEIN: Senator, thank you so much for being here tonight.

SEN. TOM COBURN (R), OKLAHOMA: Glad to be with you, Ezra.

KLEIN: It so seems to me the news of the day is the big deal is dead,
completely dead, and we are down to either a small down, a mini deal, or
going after the cliff straight. What is your reaction to this?

COBURN: I don`t -- you know, I`m not sure that`s true. Just talking
to my colleagues in the Senate, I think the middle ground is pretty well
known by everybody, and I think you could still get something that would be
viewed by the ratings agencies, as well as the American public as a pretty
good solution. So I think it`s possible. I don`t know that that will
happen.

It`s unfortunate that we`re waiting until this late in the hour to try
to accomplish something.

KLEIN: So, then, what do you see as that middle ground? I know
you`re a member of the "gang of eight". I`ve been surprised, actually,
I`ve not seen more coming out of ad hoc groups of senators and congressmen.

When you talk to your colleagues, what do they see as what can be
salvaged here?

COBURN: Well, let me answer the first part of that. None of us
wanted to try to jeopardize what was going on, so we did not intentionally
interject, other than very little behind the scenes, in terms of saying we
needed to get something done.

As far as specifics, I don`t know. There`s a range that you could
pass in terms of revenues. There`s a range in which you can meet on
Medicare that I think is solvable in terms of actually creating some
savings in Medicare that will secure it, that won`t be harmful to seniors.

So I think there`s the potential for that. I think there`s the
potential to do some changing with the sequestration, in terms of how it`s
done, so that we don`t eliminate good programs, and more of the cuts come
from those that are not as well functioning or efficient or effective.

So, you know, I think the mood among the colleagues on both sides of
the aisle is they`d like to see something get done. And what that means
is, whatever comes out that`s in that middle ground, we`re all going to
have things that we don`t like about it, but we`re going to swallow, so
that we can do what`s best for the country.

You know, the question that ought to be asked is how is it in this
country that we would let ourselves get in this position, and where have
the grown-ups been to make sure that it doesn`t happen? And that`s the
disappointing things, because it`s an abject failure of leadership, on
everybody`s part, that we`re at this late date, and no compromise has been
brokered.

KLEIN: Is there an expectation in that process that you`re talking
about would be separate from Reid and McConnell`s ongoing negotiations?
Are people going to wait to see what they do before trying to come forward
with something separate?

COBURN: No, I think they`ve heard well from their caucuses, and we`ve
been talking across the aisle. I had visits with several of my Democratic
colleagues today.

We all want to see something get done, and there`s a range in there
that everybody kind of knows where we can go. And what I would manage is
that you`ll see Reid and McConnell come with something that`s within that
range, and the president has to say, yes, I can take this too. And then if
we actually lead in the senate, we`ll see what the House does with it.

KLEIN: What I`ve had trouble understanding about the congressional
Republican strategy in recent weeks is that starting from plan B, and going
even into the Reid/McDonnell deal, or at least what I`m beginning to hear
about it, is that there seems to be a plan now to vote on taxes separate
from spending cuts, such that Democrats would be able to pocket some amount
of taxes, which will be smaller than what President Obama wanted, but it`s
going to come separate from spending cuts, at least at the outset, and it`s
likely there`s going to be another set of negotiations after the New Year.
That will have spending cuts and taxes in it.

It seems to me that that`s a recipe for Republicans to end up with
Democrats getting a lot more in taxes than they would have got in all with
an up-front deal. Are your colleagues worried about that at all, or are
you?

COBURN: Well, first of all, you`re enlightening me on something I`m
not aware of. That was not the conversation I had with my colleagues
across the aisle and that wasn`t the conversation I had with the minority
leader. So, you have information that I don`t have.

Look, you can`t solve the problem with taxes. You have to do both.
This country is in trouble, fiscally and financially as well as ratings.
And if we don`t do something significant, we`ll see another rating cut.
And there`ll come a time when the interest costs, we cannot afford.

So, the question comes is, what is the best thing we can do now, given
the political dynamics that are in Washington that actually make some
difference in the future? And when I say future, I`m talking about our
kids and grandkids. What can we do that will actually get us back on the
path?

You know, one of the things that people don`t look at, they compare
our debt-to-GDP ratios, Ezra, but when you actually make an equal
comparison from us, to the countries of Europe and around the world, we`re
actually at about 120 percent debt to GDP right now. And, of course,
that`s internal/external, but the external debt, we`re over 100 now.

So we`re in much better shape than what we recognize when we talk
about the problems that we have.

And so, I`m willing to do it incrementally, willing to do it all as a
big time. What I want to do is solve the problem for the future of the
country. And if we do that, and the more we do of it, the more we`ll see
economic growth start coming.

I think we`re primed for economic growth, but we have to solve these
very real issues to be able to take advantage of the prime.

KLEIN: I agree with you. I think the economy can take off and
Washington gets out of the way at this point.

COBURN: I think so, too.

KLEIN: Tom Coburn, Republican senator from Oklahoma, thank you very
much for being here.

COBURN: Ezra, good to be with you. God bless you.

KLEIN: There is one way we can start to fix our dysfunctional
Congress, and guess what, they are actually thinking about doing it, which,
of course, means now other congressmen are thinking about how to stop them
from doing it. That is next.

(END VIDEOTAPE)

(COMMERCIAL BREAK)

KLEIN: In 2009, President Obama asked Colorado Senator Ken Salazar to
come lead the Department of the Interior. Salazar accepted the post, but
that left his Senate seat open. Under Colorado law, Senate vacancy falls
to the governor to decide, so the choice fell to Governor Bill Ritter, a
Democrat.

Ritter made a call people did not expect. He didn`t promote a
congressman or mayor. He didn`t go for a politician at all, in fact. He
went for Michael Bennet, the superintendent of the Denver Public School
System.

Bennet was, as you can imagine, excited. He was now a senator, a
member of the world`s most exclusive club. That is a big job. It is an
impressive, big job -- a job that makes you think pretty highly of
yourself.

What Bennet was not prepared for was that when he took that big,
important, impressive job, everybody would all o of a sudden hate him. And
they would hate him because they hate Congress, and he was now part of
Congress, this thing that they hate.

In November of 2011, Bennet went down to the floor of the Senate with
a chart that is still one of my favorite charts of all time. It was a
simple chart. It just showed how popular different things were.

The IRS, the people who collect taxes and audit you, 40 percent
approval rating, unpopular.

Richard Nixon during Watergate in 1984, 24 percent approval -- also
very unpopular.

Banks, which had just crashed the global financial system and were
throwing tens of millions of people out of work worldwide, 23 percent
approval, not good.

Paris Hilton, 15 percent approval.

The U.S. becoming a communist country, which had apparently been
polled by Rasmussen, got 11 percent approval, oddly.

And then there was Congress -- 9 percent, 9 percent approval rating.
That is not good, people.

Now, that was in November 2011. Today, according to Gallup, Congress
is up to 18 percent. That is still awful.

And it would be one thing if the members disagreed, if they loved it.
But even the people who serve in Congress, they don`t like Congress, they
hate Congress. They are embarrassed by it.

Just listen to `em.

(BEGIN VIDEO CLIP)

SEN. BOB CORKER (R), TENNESSEE: We have lacked the courage to face
up, to deal with these issues. We here in Washington are going to hurt the
American economy. We`re going to hurt Americans at every level. And to
me, it`s just a travesty that we`ve not been willing to deal with this
issue.

REID: Americans believe Congress is broken. The American people
know, Democrats and Republicans, that this place isn`t working and there
need to be some changes.

SEN. OLYMPIA SNOWE (R), MAINE: America people should not countenance
this deal made in this gridlock. We`re here to do our jobs in Washington,
and we`re seeing this failure demonstrated time and again because of
ideological and political and philosophical stubbornness.

What about the entire country? What about the good of the country?

(END VIDEO CLIP)

KLEIN: And yet, any time anyone tries to change anything about
congress, any time someone tries to make it a little bit better, the forces
of the status quo mass together and quick.

One of the main things that is broken about Congress right now is the
filibuster. The Senate was built to be a majority rule institution. The
Founders, they considered making it a super majority, where you would need
more than a simple majority to pass the bills. They rejected that big
time. In a Federalist 22, Alexander Hamilton wrote that a super majority
Congress would in practice serve to, quote, "embarrass the administration,
destroy the energy of government, and substitute the pleasure, caprice or
artifices of an insignificant, turbulent, or corrupt junta to the regular
deliberations and decisions of a respectable majority."

Good writer, that Hamilton.

But in recent years, the filibuster has remade the Senate into a super
majority institution. You need 60 votes to get almost anything done.
Between 2009 and 2010, we had more filibusters than we had in the `50s,
`60s, and `70s combined. And they`re not filibusters like we think of
them, where the senators go to the floor and debate an issue until they
keel over from exhaustion. They`re just obstruction.

If you watch a filibuster today, it doesn`t look like anything. It`s
the blue screen on C-Span, the one with the classical music playing over
it. You don`t tune in to here an intense minority demand a great debate on
the issue of the day. You tune in to hear a string quartet.

Senator Jeff Merkley, a Democrat from Oregon is trying to change that.
He`s got a proposal to force talking filibusters in the senate. It
wouldn`t change what I think is a central part in the senate, the 60-vote
super majority, but it would make the filibuster into something that the
minority had to put some effort into using. You have to want it.

Now, so I want to be clear on Merkley`s proposal. If it passed, the
minority could still filibuster anything they wanted. They couldn`t
subject almost everything to the same 60-vote challenge we have now.

All they would have to do is talk. Tell the American people why. And
they probably wouldn`t even have to do that that much, because the majority
can`t just let them talk all the time, they have to let them get stuff
done.

But even that modest reform, even that is too much for many senators.
"The Huffington Post" today reported that a bipartisan group of lawmakers
led by John McCain and Carl Levin are developing a counter proposal that
does even less than Merkley`s proposal. It would speed up the amount of
time it takes to vote on the filibuster, eliminate some redundant
opportunities to filibuster, give quicker consideration to some
nominations, as long as no other senators objected. And give the minority
a little bit more freedom to offer amendments. That is it.

If you turned on to C-Span during the filibuster, still be that blue
screen with the classical music. It`s filibuster form for people who don`t
think the filibuster is broken.

The idea that there is any one in the U.S. Senate who would look
around and say, you know, this is basically working out. This place is
basically working the way it`s supposed to be working, it is shocking.
When you poll lower than Richard Nixon during Watergate or the Internal
Revenue Service, it is time to start rethinking how you are dogging on
things.

And not just rethinking on the margin, not just in the small ways, in
ways -- not just in the ways where you`re throwing your critics a little
bone, in big ways. In ways that show that you, a politician supposedly
answerable to the people, you actually care that they hate the job you`re
doing.

Joining me now is Democratic Senator Jeff Merkley of Oregon. His
filibuster reform proposal is known as the "Talking Filibuster".

Senator Merkley, thank you very much for being here tonight.

SEN. JEFF MERKLEY (D), OREGON: Ezra, good to be with you.

KLEIN: So, first, let me get your reaction to the counterproposal by
Senators McCain and Levin. I`m sure you`ve looked at it by now. What do
you think of it?

MERKLEY: Absolutely. This proposal is all about not addressing the
core problem paralyzing the Senate. Right now, the filibuster, as you
described it, it`s silent, it`s secret, simply an objection to a simple
majority vote, no talking required. Therefore, no visibility, no time and
energy, no accountability to the American people.

On bill after bill that we wanted to pass, if the filibuster had had
to be done out in open, before colleagues, before the public, we would have
had the momentum to be able to get that legislation passed, because we were
in sync with where the country wanted to go. But the group today put
forward the proposal that basically is designed to pull the rug out of this
reform effort.

KLEIN: The argument that folks like Senator McCain make is that, yes,
this might sound good to you now, but if you are in the minority, you are
going to regret touching the filibuster at all, and you`ll particularly
regret setting a precedent that the Senate rules can be changed with a
simple majority.

Tell me why you don`t believe that that`s true. Tell my why you`d be
willing to live with your reforms in the minority?

MERKLEY: Well, the Senate rules have already been changed with a
simple majority. It was done in 1975. It was de facto done in 2005, in
just recent memory.

And quite frankly, I have worked very hard along with my colleague,
Tom Udall of New Mexico, to propose reforms that we think are healthy for
dialogue and debate and that we would accept in the minority. If we want
to block a simple majority vote, we should have the guts to stand up on the
floor of the Senate, make our case before our colleagues, and before the
American people. If we don`t have the courage of our convictions to do
that, then we should sit down, shut up, and let a majority go ahead and
make the decision.

KLEIN: So I know you`ve been talking to many of your colleagues.
You`ve been working on this a long time. Do you think that you and Senator
Udall have the votes? And in particular, do you think that the leadership,
like Senator Reid, will be with you on this, as opposed to the merging
coalition with McCain and Levin?

MERKLEY: Senator Reid will have the votes for whatever package he
puts together. Certainly, I`m advocating that that include the talking
filibuster. I think that if we take the momentum that`s built up over the
last two years and squander it in the fashion proposed by some colleagues
today, we miss an historic opportunity to kind of seize the reins of the
Senate and say we`re going to steer the Senate in a direction that makes it
work better in debating bills, on deciding issues, and doing the work on
the issues that are before us -- the big issues facing America.

KLEIN: Speaking of how things are working on the big issues facing
America, I know you were following, obviously, the events of the fiscal
cliff today. Are you confident that Senators Reid and McConnell can come
to a deal?

MERKLEY: No, I`m not confident at all. I know they`re going to give
it their best shot, and I wish Godspeed to them.

I can tell you that on January 1st in Oregon, we will have about
29,000 to 30,000 folks who will lose unemployment benefits, and they`ll
lose them right in the middle of their tiers. It isn`t as if it`s planned
or graduated. It`s sudden. It`s like cutting people off at the knees.

And over the coming 30 days in January, we`ll lose another 10,000.
And that`s 40,000 families, not only are they decimated by this, but
they`re going to be impacted -- the communities will be impacted by the
loss of spending from those families.

So that`s just one little piece of this. There are so many other
pieces. It`s urgent that these issues be addressed. It`s regretful that
we`re here at this last moment.

KLEIN: I`m really glad you brought up unemployment benefits. We`ll
be talking about those a bit later in the show.

Senator Jeff Merkley of Oregon, thank you so much for being with us on
a Friday night here.

MERKLEY: You`re welcome.

KLEIN: During this fiscal fight, there is one group that keeps
getting kicked around. They are the group that can afford to get kicked
around least. That story is coming up.

(COMMERCIAL BREAK)

KLEIN: If you drive northwest out of Columbia, South Carolina, and
I`m going to admit something, I actually have not done this myself, you
will eventually come to a teeny tiny little town called Little Mountain,
South Carolina. There it is. You can see it on the map there. Little
Mountain, South Carolina. Population: 292 people.

Little Mountain has a single stoplight, just one. And Little Mountain
has a current job opening -- mayor. There is currently no mayor in Little
Mountain, which is odd. The mayor manages a $95,000 budget, not nothing,
plus state grants for school improvements and an elder care facility.
There`s also the Little Mountain Reunion, a folk festival that draws around
10,000 people, big for Little Mountain, and which the mayor is supposed to
help organize.

Little Mountain seems to really need a mayor. And yet, nobody ran for
the office in November when the 16-year incumbent retired. And the top two
write-in candidates, they both turned the job down. They don`t want to be
mayor. Marty Frick is a maintenance supervisor and 67 of his fellow Little
Mountainites wrote him. But Mr. Frick used to serve on the town council
and his wife is having some health issues, and after considerable and
solemn consideration, he declined.

The retiring mayor, Buddy Johnson, he was second in the voting, he got
20. But he`s retiring. He doesn`t want to do it.

Mickey Mouse and Snoop Dogg also got votes, but one is a cartoon
character and the other is Snoop Dogg, although I`d like to meet the
resident of Little Mountain who is a fan of West Coast gangster rap.

All this would seem to point to Melvin Bowers, the ranking member of
the town council, but Mr. Bowers` wife is also having a couple of health
issues and he declined the gig.

The town plans now to hold a special election in March in hopes that
someone, anyone, is going to be willing to be mayor. This right here, it`s
a story of sort of government and politics and small town life.

Mr. Frick, the leading write-in vote getter told "The New York Times"
that politics has lost his luster, even in small towns. Oh, gee, I wonder
why. Thank you, Washington.

But it`s also a story, an interesting story about unemployment. You
have a job available, one that only pays 100 bucks a month, and nobody
wants it. And that in this economy is very, very rare. A job no one will
take.

For most available jobs, there are lines out the door of qualified
applicants. And that is the most important fact about not just the
economy, but about what is happening in Washington right now, as we speak.
The biggest deal, the biggest problem with a deal that has not been struck
in Congress is coming up next.

(COMMERCIAL BREAK)

KLEIN: I want to get out of Washington here for a minute. I want to
show you the blaring headline today over "The Tennessean" newspaper, the
big newspaper in Nashville, Tennessee. Thirty thousand Tennesseans will
lose unemployment benefits with that fiscal cliff deal, 30,000.

Here is a headline at KTVN in Nevada: Unemployment insurance
recipients notified benefits may end. Nearly 25,000 Nevadans were notified
this week that their unemployment benefits will end after this week if
Congress does not vote by Tuesday to continue them.

Here`s the headline out of Michigan: 85,000 -- 85,000 Michiganders
losing unemployment benefits.

Here`s the "Palm Beach Post", 115,000 Floridians being cut at the end
of the year.

Forty-three thousand in Connecticut could l lose unemployment
benefits.

A few minutes ago, you heard Jeff Merkley of Oregon mention, I
believe, the 30,000 in Oregon.

One of the things that has been lost in all the fiscal cliff wrangling
over the last couple of months is something really dramatic will happen
really soon that will affect a ton of people who cannot, cannot afford it.
Four days from now, if Washington cannot find a way to get its act
together, 2 million people will lose their unemployment benefits all at
once. They will go all go away.

Unemployment insurance is different from the other parts of the fiscal
cliff in that way. There are tricks we can play on, say, the tax side. We
can change withholdings so you don`t notice it. And on the spending side,
instead of laying off people, we can furlough them.

There are things we can do in a lot of parts of the fiscal cliff, if
we do over for a week, or two weeks, maybe even a month, we can prevent the
big pain from taking effect until Congress reaches a deal. There are ways
to make the cliff a slope, a plain, or a rolling hill, at least for a
little while.

Unemployment insurance is not like that. If no deal is reached by
Tuesday, it ends. It ends for 30,000 people in Tennessee, for 85,000 in
Michigan. For 119,000 people in Florida. These are the people who have
been hit hardest by the great recession and who are the worst off right now
-- 2 million of them across the country.

Now, there are a lot of dumb things about this fiscal cliff time bomb
that Washington is about to set off, but this one right here, this may take
the cake as the single stupidest thing we could possibly do in this
economy. Providing unemployment insurance to people without jobs in
addition to being the right thing to do, it is crazy stimulative. It is
stimulus on steroids.

When you give people money to spend and they don`t have a job, when
they don`t have any other money coming in -- you know what they do with
that money? They spend it. They spend pretty much all of it. They spend
it on gas, on groceries, on bills, on rent, on clothing for their children.
That is real money, and it goes right back into the real economy, to be
spend again.

It is not like tax cuts, where a big chunk gets saved. This money
gets spent and spent quick. It helps the economy. Cutting that off, all
at once, means you take that money out of an economy, just beginning to get
back on its feet.

Earlier this year, the Congressional Budget Office looked at the
economic impact of unemployment insurance. They found extending
unemployment benefits would increase economic growth by as much as half a
percentage point. That`s big in a year when 3 percent or 3.5 percent would
be a good number.

So, (a), it is great for the economy, unemployment benefits. It is
the stimulative thing built into the system.

And (b), well, (b)is the part that is even a little harder to stomach.
In the great history of this country, we have never before discontinued
federal unemployment benefits when the unemployment rate was above 7.3
percent.

Right now, that rate is 7.7 percent. This would kind of be a grand
experiment we are trying on the unemployed. Let`s just kick them off
unemployment insurance in an economic environment where we`ve historically
never done that before. Then, let`s see what happens.

But, you know, what, it`s actually even worse than that. What makes
this a real punch to the gun is that what Washington is now threatening to
do, what they are just four days away from actually doing is taking away
the extended unemployment insurance from those who have been unemployed the
longest, and at the same time, by going over the fiscal cliff, bringing the
recovery to a screeching halt.

People argue over how bad it would be to go over the cliff, but
everyone agrees, it would be bad. And if we go over for long enough, it
will create a new recession. So, now, you don`t have a job and you don`t
have unemployment insurance. You`ve been looking for a long time -- and
good luck finding a new job, because we just crashed the economy.

(BEGIN VIDEO CLIP)

OBAMA: The American people are watching what we do here. Obviously,
their patience is already thin. This is deja vu all over again. We`re now
at the last minute. And the American people are not going to have any
patience for a politically self-inflicted wound to our economy. Not right
now.

(END VIDEO CLIP)

KLEIN: This would be a wound to the very weakest in the economy. So
what is it going to be here, Congress? How badly do you want to hurt the
people who have been hurt worst by the recession?

(COMMERCIAL BREAK)

KLEIN: Prepare yourselves to see the great Rachel Maddow as you have
never seen her before. It is not the best new thing in the world, because
it is not exactly new. But it is related to the best new thing in the
world today, which is a tremendous thing.

(COMMERCIAL BREAK)

KLEIN: One of the ways the United States Congress reacted to the
spying shenanigans of President Richard Nixon was this law called the
Foreign Intelligence Surveillance Act. It was introduced by Senator Ted
Kennedy and the idea was to provide, I`m sorry, some oversight over the
government`s spying activities when it was Americans who were getting spied
on.

The act was known as FISA. It forced the government to get permission
from a special FISA court if, for example, they were tapping the phone of
foreign agent and that guy happened to call an American. In the U.S., you
need a warrant for that.

President Carter signed the bill into law in 1978. It was the law of
the land for more than 20 years, until it got amended under President
George W. Bush. You might remember this. A Patriot Act and a number of
other congressional acts vastly diminished FISA`s privacy protections and
expanded the government`s ability to spy on you and on me and all Americans
to tap our phones and read our e-mails.

And, in the end, you would probably never even know they were doing
it. And we as a country, at that time, we had a huge fight about it. It
was a major issue in the 2004 presidential campaign between President Bush
and John Kerry.

In the 2008 Democratic primary, then-Senators Clinton and Obama, they
fought about it. They even ended up voting on opposite sides of the issue
when it came up for a vote that summer.

FISA, and whether or not we already have a government with too much
power to spy on us, whether or not there should be more congressional and
judicial oversight of that power, whether or not more should be done to
protect people`s privacy -- our country`s been having been fights over that
tough for years now.

But you know what happened today in Congress? Congress, despite being
stalled on pretty much everything -- today, Congress extended FISA,
extended the federal government spying powers and did it quickly, like
that. The Republican-led House passed a bill in the fall with a little
help from Democrats and the Senate passed it today in an overwhelming vote
of 73 yeas to 23 nays. President Obama is expected to sign it.

If you are a civil liberties guy, there was good news and bad news in
this debate. The good news for was that there were a bunch of privacy
amendments, including one from Democratic Senator Ron Wyden of Oregon. His
amendment would have required the head of the country`s spy agencies to
tell Congress when Americans accidentally got spied on. Right now, we have
no way of knowing how often that happens. It seems like something we might
like to know.

Also, Republican Senator Rand Paul of Kentucky, he wanted to force the
government to get a warrant to read our e-mails and other electronic
communications.

For privacy advocates, these amendments were the good news. The bad
news, the Democratic-controlled Senate killed every single one of those
amendments, killed them dead. They voted them all down.

And today, the once-controversial warrantless wiretapping bill was
extended for another five years, and amazingly, almost nobody seems to have
noticed.

We used to fight about this stuff. The whole reason FISA needs
congressional reauthorization every few years is that we are supposed to
reassess it, debate it, have a big conversation about it. But we were
quiet this time.

So let`s have one here.

Joining us now, not to be quiet about it, is my friend Julian Sanchez,
a research fellow at the Cato Institution.

Julian, it`s good to see you here. Thanks for joining us.

JULIAN SANCHEZ, CATO INSTITUTION: Thanks for having me on, Ezra.

KLEIN: So, this was an extension of the FISA bill that already
exists. But given the amendments that are being offered, what could have
changed? Was it -- was it a missed opportunity here?

SANCHEZ: Yes. I mean -- and the sort of political maneuvering that
was used to kill these very common sense, mild amendments was really a kind
of shockingly anti-democratic move. These are amendments that were
proposed, you know, months ago. And yet, the debate here happened four
days before the law was slated to expire.

And because it was basically impossible to make a serious case against
these amendments, the argument basically came down to, look, there just
isn`t time to get a modified bill to the House, so we have no choice but to
give you your day of symbolic token debate, but we can`t really, you know,
seriously countenance any changes to this bill, because scary terrorists
will get us if, you know, for even a day, they`re forced to rely on the
orders that already exist and are in effect for a year from when they`re
issued. It wouldn`t really have changed very much, if it had lapsed for a
week, but no one wants to, you know, be seen to let the intelligence
agencies somehow lose some of their power, for even an instant.

The amendments were, again, very basic. Ron Wyden wanted to make the
NSA or at least encourage the NSA to develop --

KLEIN: The National Security Agency, the NSA.

SANCHEZ: Yes, the National Security Agency, which is conducting these
blanket surveillance. Instead of traditional individualized FISA warrants,
the FISA Amendment Act, it creates basically general warrants, the very
thing the Fourth Amendment was written to prevent, a kind of blank check
where the judges sign a very broad authorization and the agents have
discretion about who gets wiretapped, as long as it`s international
communications or surveillance with a foreign target, which includes
foreign group.

So, it may be a Google Gmail account, as long as their purpose is to
get information about al Qaeda, they can do that, and if it turns out after
the fact that was an American`s account, as long as they didn`t know at the
time they were getting domestic communications, which of course you
wouldn`t, it`s all legal and they can keep an enormous database
indefinitely.

So, Wyden very sensibly said, look, you`re claiming we`re not at risk,
our civil liberties were not at risk, because you have this incredibly
robust over sight. Well, shouldn`t not we have some rough estimate on how
many American`s communications are getting swept up in this database? And
the NSA has reputedly said, essentially, we can`t do that, and the reason
why we can`t do that is secret. So, go to a secret room and read the
reason why we can`t do this. The public isn`t allowed to know.

He also wanted to bar back door searches. The idea here is, again,
because the authority is so broad they can essentially say we`re going to
intercept initially all communications between the U.S. and Pakistan and
just sort of sift through them later to see what satisfies the criteria for
being relevant to a terror investigation. And so, Wyden`s idea here is,
look, if this is supposed to be the idea as you keep claiming, spying on
foreigners, and not Americans, then once you collected very broadly these
huge rings of communications, you shouldn`t be able to go into the database
and sort of Google for Ezra Klein, because that would very clearly be using
that information to go after American --

KLEIN: Usually, I`m pro-Googling for Ezra Klein --

SANCHEZ: Usually, not in the NSA.

KLEIN: Not in the NSA. Let me ask you something about the White
House on this because I think it`s important.

President -- my understanding on Obama`s movement on the civil
liberties was he was much more aggressive that we needed more FISA
oversight as a senator has been as a president? Where was the White House
in this debate?

SANCHEZ: They have, I mean, steadfastly fought any modifications as a
total 180. Barack Obama initially pledged to filibuster the FISA
Amendments Act, and then, ultimately, sort of reluctantly said, decided he
was going to support it. In fact, he voted to break another senator`s
filibuster, but said because his own supporters were upset about this, a
group called Get FISA Right criticizing his position became the largest
sort of supporter group on MyBarackObama.com.

So, he was forced to release a video in the statement saying, look, I
recognize this is a flawed bill. It is not how I would have written it.
But instead of not letting them have a tool I think they probably need, I`m
going to support this. But it is flawed. I`m going to do a review later
and look at what kind of additional civil liberties protections that might
be needed.

And yet of course, this administration has fought every possible
proposal, often in incoherent terms. I mean, so, for example, Senator
Merkley, who you just had on, wanted to require the FISA court or at least
the Justice Department to release redacted opinions of important
interpretations, so we don`t have secret law. Americans actually know what
the surveillance means. They say on the one hand, no, no, we don`t need
this because we`ve already promised to do this, and then on the other hand,
what we can`t do -- it would be dangerous to national security, somehow.

So, a really incoherent position.

KLEIN: This often seems to be the way with the White House, right,
that when they get into power, suddenly, executive power looks a lot better
to them.

SANCHEZ: Yes.

(CROSSTALK)

KLEIN: Julian Sanchez, research fellow at the Cato Institution --
thank you for joining us, tonight. Good to see you, my friend.

SANCHEZ: Good to see you.

KLEIN: For those of you who are frustrated because this show doesn`t
do more stories about incredible Norwegian kickers, go to relax. We got
your back on this thing. The best thing is straight ahead.

(COMMERCIAL BREAK)

KLEIN: The best new thing in the world today is a video made by a guy
with a very special talent, a guy who videotaped himself using that talent,
and then uploaded the video to YouTube. A bunch of people saw it, and now,
he may be getting the chance to use that talent for a living.

It is the kind of story you have heard a million times. But honestly,
the way a story like this one becomes popular is when the thing the guy
films himself doing is awesome.

Case in point.

(VIDEO CLIP PLAYS)

KLEIN: That is a guy named Havard Rugland, he is 29-year-old man who
was born and raised in a small little village in Norway, a country where
they do not have football, where they do not American football, because
obviously, in Norway, like in the world, they have football as in soccer.

And because this guy is amazing at kicking a ball, in this prominent
video, Rugland shows off a whole bunch of skills, most of them the kind
that a kicker in American football doesn`t need in the course of a game.
But he also shows off a bunch of skills that actually would come in very
handy on a gridiron.

And he reportedly made this video because after years of playing
amateur soccer in Norway, he figured he would give -- play kicking a
football, an American football a try, just to see what he could do, as you
do, you know?

Rugland practiced more than a year, and made this video with some
friends and upload back in September.

Now comes the part in any story about a video of someone doing
something amazing where you ask, is this real? It`s hard to answer in
certainty. We`re not in Norway. But maybe what happens next will enough
of an answer. The video got Rugland an investigation to come to the U.S.
and work with an NFL kicking coach and to try out for the New York Jets,
which reportedly happened next week.

And Rugland has been invited to come back with a second Jets tryout in
a month. And he now has a sports agent.

So kids, there is a moral to the story. And that is if there is
something you can do and if you have access to a camera, you might want to
practice until you get really good at it, and you can put it up on YouTube
and let the world know what you can bring, because you never know the
exciting opportunities that might bring.

For example, Rachel Maddow herself recently showed the staff of THE
RACHEL MADDOW SHOW that she has a unique ability that has no evident,
potential, discernible valuable in the marketplace.

(BEGIN VIDEO CLIP)

UNIDENTIFIED FEMALE: What was your other trick that you do?

RACHEL MADDOW, TRMS HOST: This one?

UNIDENTIFIED FEMALE: Can you do the armpit farts?

UNIDENTIFIED FEMALE: That one upsets me.

(CROSSTALK)

UNIDENTIFIED FEMALE: It just looks like it hurts.

(END VIDEO CLIP)

KLEIN: I have always -- I have always been impressed by Rachel Maddow
when I watch the show. And now, having tried to host the show myself, I am
beyond impressed with what she does here every night. It`s more like awe.

But now, now that I know of her ability in (INAUDIBLE) one hand
clapping, I am bowled over. You cannot stand before that kind of talent.
It is the best new thing for today.

That does it for us tonight, Rachel back here on Monday night for a
special New Year`s Eve edition of the show.

Now, it`s time for "THE LAST WORD WITH LAWRENCE O`DONNELL."

A great weekend and a happy New Year.

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY
BE UPDATED.
END

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